More Thoughts On Silver Spoon Kids

The following are more thoughts and notes from our reading of Silver Spoon Kids.

When you die, you will leave behind your money but most importantly your values; which will be most important to your children and their quality of life? It seems a major mistake many financially successful families make is they spend all their time and energy trying to provide the first resource and give little if any attention to the latter. As the parent of one friend quipped about the inheritance he planned to leave behind, “I’ve done my part.” And as my friend observed, “What does that mean, and what are we supposed to do about it?”

According to the authors, there are five primary ingredients to consider if one endeavors to raise responsible, emotionally healthy affluent children:

demystify money

understand fundamental psychological principles of human development

clarify concept of personal values (parent)

parents’ relationship with money

money messages that are modeled for children

Money itself is not “the problem”, but rather the problem is money unaccompanied by values.

A generational problem that faces families whether they are financially successful or not, but which is especially easy to overlook as important for the affluent, is that all parents face different sets of challenges; strategies that may have been appropriate (with money) in one set of circumstances may be damaging when affluence is a factor. So it isn’t enough for parents who struggled to make money to leave their kids with the same attitudes and perspectives they had before they had money, and it also isn’t enough to assume that just doing the opposite, or worse, scolding, terrifying or otherwise being neglectful towards children with regards to money, is going to address the issue.

Passing on values from parent to child requires repeated interactions over many years and some families don’t have (or make) time for this repetition. If the getting of money is demonstrated to be a more important value for a family than the coming together to talk about its meaning, guess what the children learn from that? Guess what children learn from any parent who is not present? Answer: whatever the hell they want, and nothing good. You can not parent from a distance.

Engaging in real conversations with real people (like their parents) is how kids mature emotionally and become socialized. It isn’t realistic to expect children to become reasonable and responsible about money without an example of reasonable, responsible attitudes about money being modeled for them that they can interact with. Affluent or otherwise, kids need their parents to be their for them to grow up right. This is a fundamental principle of child development.

Consistency of routines and experiences is a big part of transmitting values and socializing children effectively, ie, taking the same family vacation to the same place each summer (depth rather than breadth). So it’s less important WHERE you vacation or HOW you vacation but rather THAT you vacation, and that you do that over and over again so children can count on it and grow through the experience.

One goofy example from the book that stood out to me as a mistake not to make in terms of prioritizing values: a well-to-do family found their “dream house” early on in the family formation process. In order to afford this “dream house”, mom had to go back to work and earn an income outside the home. Somehow she was able to make enough to help make the mortgage AND to hire an au pair to help look after the kids. The result: a beautiful home empty of a real family to live inside of it. This is putting the cart before the horse. The author’s didn’t say this but that is my read on the situation.

Another point raised in the book is that lecturing kids about money isn’t effective. Besides the fact that no one likes being lectured to and few tune-in for such treatment, the simple fact is that the transmission of values requires repeated interactions with multiple nuances on the same subject for the knowledge of the observer to become intuitive. Kids take their cues from thousands of interactions with you, from listening to what you say and observing what you do in a wide variety of situations. It is the furthest thing from a “one and done” Birds & Bees-type conversation to get habits, disciplines and attitudes about money across.

In terms of understanding child development, one of the truly crucial discoveries has been the importance of children forming a secure attachment with attachment figures while they’re young. Without this bond, children tend to experience all sorts of emotional difficulties as they go through different developmental stages. Dysfunctional relationships about money are just one thing. You can solve all kinds or problems in your family, money and more, simply by consciously creating the conditions for secure attachments to form between children and parents.

Many affluent parents fret about their children being able to navigate the risks of the wider world. The key here is to help children develop the capacity for self-regulation, and self-regulation is rooted in secure attachments to parents. Children who have developed the capacity for self-regulation tend to exhibit increased emotional resilience when dealing with adversity and tend to do well in social relationships as they grow older.

Secure attachments require empathic communication– helping children to feel seen, heard and understood. Affluent parents should be investing in RIE classes with their infants and young children and NVC seminars with their adolescents and teenagers, they have the means and time to do so and it will pay dividends throughout their life.

An interesting developmental concept shared in the book was Erik Erikson’s Eight Stages of Child Development, which suggests there are key developmental goals for each major stage of a person’s life:

Birth to 1yr; trust

2-3yrs; autonomy

4-5yrs; initiative

6yrs-puberty; industry

adolescence; identity

early adulthood; intimacy

middle adulthood; generativity

later adulthood; integrity

The first stage, trust, is about developing secure attachment with caregivers. The second stage, autonomy, is the process through which the child comes to understand their existence and capability for survival independent of their parents, primarily the mother. The third stage, initiative, is where the child becomes increasingly self-directed in their learning and play, making their own decisions about how they want to spend their time and what experiences they want to have. The fourth stage, industry, is a time where the child becomes conscious of their ability to be productive and to make a helpful contribution to their social circle (their family). The fifth stage, identity, is when the child is entering personhood and begins to contemplate who they are, what their values are and what meaning they want their life to have. The sixth stage, intimacy, is the necessary precursor to repeating the genetic cycle through pair bonding and family formation as the person learns to grow close enough to another person to form the intimacy necessary for procreation, but also to develop tight enough bonds with others in general that they can become secure within society. The seventh stage, generativity, represents not only procreation and the populating of a new generation but also the peaking productive energies of adults at home in terms of their creativity, work output and intellectual and social contributions to others. The eighth and final stage, integrity, is a reflective period in which most of us will hopefully be able to look back on our lives and feel content that we lived our life according to our most cherished and esteemed values. For some who realize they have been living a lie or not living up to their own expectations, this can be a very painful time indeed, and it is particularly so when surrounded by younger family members who are attempting to form secure bonds, discover their identity, attain initiative and engage in industry or sort out their own identity, when the model before them is a big, fat hypocrite or pathetic loser! Think ahead and don’t become a person filled with remorse by the eighth stage, life catches up to you.

Thinking back to the example of the family that prioritized their home ownership dream over having mom home with the kids, this quote stood out to me:

In the best of all possible worlds, at least one parent is financially able to be a full-time mother or father during the first year.

Of course, the authors were quick to qualify this right afterwards by assuring the reader that, while ideal, you can still raise a good family without this (yeah… but it’s not ideal, which is the whole point). But what I think is most important about this concept is that the ability of family to actually be together is itself a huge Standard of Living value that most people overlook, especially people seeking or experiencing affluence. It’s like they’ve got the fancy house, the nice car, the swanky clothes, the expensive eateries and the ‘gram-able vacays, but they don’t think to spend their affluence escaping that trap of impoverished families mentioned earlier in the book: the inability to afford the time to be together. What would the world look like if more affluent families put that value first and foremost in their family planning strategy?

Why affluent parents should avoid protecting their children from life’s miseries:

Frustration is inherent in any learning process, affluent families should not try to shield their children from this; avoid using affluence to take away the child’s struggle. Children who are not permitted to struggle and succeed often develop a sense of inferiority.

Another key piece of advice I have almost never heard any affluent family engage in purposefully (although all kinds of families will get here in an unintended shouting match or something like that!):

Tell your child about some of your mistakes and some of your failures.

Why? Because it’s valuable for affluent children to know that even their parents, who mostly succeeded in life, screwed some stuff up along the way and still arrived where they did. It takes the pressure off and makes it more realistic to consider “being human” as an option.

In describing personal attitudes about money, the authors described our money relationships existing along three dimensions: acquisition, use and management. Every person has a unique combination of attitudes regarding these three factors, and each person can be either overly conservative or overly risky in regard to each (or skewing toward one of the extremes).

When thinking about the second dimension, use, an important question to consider is:

Does your family have a sense of what is “enough” and why?

For people who think they never have enough money to be happy, maybe what they really are experiencing is a deficit of values, or a failure to align with them in terms of their choices:

People who live in accordance with their values enjoy happy lives; children who live in accordance with their values enjoy an identity.

The authors describe the phenomenon of children who are fully absorbed with their own kind of “Keeping Up With The Joneses” competition for material possessions and status. I refer to this as “social metaphysics” and it seems from the author’s experience that it occurs when children do not have their own values to anchor their observations and experiences in. As a result, they end up referencing other people rather than themselves when trying to arrive at judgments.

And back to the modeling idea:

Our behavior around money tells our children more about our money values than anything we say. Our children may accept our money values or they may reject them, but we guarantee you that they won’t ignore them.

Besides being a hypocrite, you can also make the mistake of saying NOTHING about money with your kids. But that’s a big mistake, too:

Giving money the silent treatment not only robs your kids of the skills needed to manage it, but it can also result in emotionally unhealthy attitudes toward it.

As one estate planner put it “no device that I can draft will make up for lessons that weren’t learned as a child”.

To help your children develop their own consciousness about money, employ reflective discussions with your child which involve asking questions about what, when, why and how to help them form an opinion and reflect on their own wishes and ideas, the foundation of abstract thinking.

Age-appropriate discussions about money

Here are some specific strategies the authors recommend for discussing money with children at various ages/developmental stages:

Ages five and under; we strongly believe you should limit your preschool child’s exposure to television advertising because of her natural “wanting” tendency; what preschoolers can and should learn is the concept of saving, around age three, use the exercise of depositing a fixed sum in a jar each day before allowing it to be spent at a future time, establishes the connection between giving money and getting something return after waiting for money to accumulate; also can discuss the difference between “need” and “want” and illustrate through concrete examples such as food for dinner versus ice cream for dessert

Six to twelve years old; it’s good to start kids on allowances earlier rather than later, let the kids make budgeting mistakes when they’re less likely to engage in emotional battles over insufficient funds; kids as young as eight can be taught to budget and select from among alternatives if you take the time to explain the process; when talking about money, talk in terms of choices and consequences (tradeoffs, also, basic economic concepts?); open a savings account at a local bank and include the child in the process, discussing how it works and what it’s for

Thirteen to eighteen years old; address issues such as the cost of a given item versus its value to the individual, what constitutes an “overpriced” product or service and the idea of setting and adhering to a reasonable budget; giving a teenager and unrestricted credit card simply teaches them to spend; they should be encouraged to budget for longer periods of time, for the entire month or even a school quarter or semester; involve your children in the research process behind a major purchase, let the teenager evaluate product quality and price via internet research and make a recommendation

And here is a list of helpful “Money Dos” for those not inclined toward negativity and things to avoid:

do be honest

do connect the concept of money with that of responsibility

do help them understand that there are limits on spending

do acknowledge your child’s negative feelings about money and wealth

do treat their questions with respect

Allowance is a hot topic amongst the affluent and some are skeptical because it seems like “socialism” or a “handout”, but an allowance only has a negative effect if parents refrain from dispensing values along with the money according to the author’s research. Instead, view an allowance as the child’s rightful opportunity to share an appropriate portion of the family’s resources. As a more global concept, perhaps families should have a Family Bill of Rights as a family governance tool, and allowance and other money/wealth rights and responsibilities should be outlined in this document. Ie, “As a member of the X clan, you have the RIGHT to Y, but also the RESPONSIBILITY to provide/do Z.” This helps build a distinct family culture around money and other important family values and norms. If your child is going to become a responsible adult, he needs to know that privileges and responsibilities will be inextricably linked throughout his life. As a member of the family, your child should share in both the privileges and responsibilities that go with his membership.

Determining what’s appropriate (as far as size of allowance and what it can be spent on) is a process you should share with your child; by communicating allowance parameters you are communicating a rationale that contains your values. You’re also treating your child as a responsible, serious person regarding money, which is how you want them to think of themselves as they deal with it.

If you establish an allowance or some other means of financial support, stick to it. Rescuing sends the worst money message possible; the link between hard work and additional pay is a good one, as it demonstrates that you are the one who can save yourself. If your kids get stuck in a money hole, offer them ways they can go above and beyond to earn additional resources to bail themselves out. Create a list of special chores with a specific dollar amount attached to each; don’t keep this list a secret. But don’t turn money into a game. If you use money to control your child’s behavior, you will raise an adult who is controlled by money.

Later in the book, the authors spend some time talking about the importance of diversity and learning to appreciate and accept (it is implied) people without affluence. They say, “we must learn to help our children value people for their character, who they are, the obstacles they have surmounted and what they have accomplished with their lives”. I think the intent was sincere here but I can imagine your average progressive becoming enraged with this reasoning– what about people who don’t have much character, who haven’t managed to surmount their obstacles because they’re too big, onerous or unfair, or who otherwise have simply been stomped into the ground in life and can’t keep up? How is this not a recipe for failing to value those who have failed?

However, I really liked their take on the importance of inculcating the value of philanthropy, because I think they did a good job of connecting the developmental values of philanthropic activity to the patterns mentioned earlier in the book. Instead of just making some lame moral argument that you’re a bad or incomplete affluent person without having a conscience that goes beyond yourself (smuggled premise), they made the logical, self-interested argument that the thought processes and actions required in philanthropic activity are conducive to building genuine identity, self-esteem and concrete and realistic notions about wealth. Here are some quotes:

We are deliberately not using the word charity, but philanthropy, a desire to help mankind, encompasses all forms of activity and endeavors that help make the world a better place in which to live.

Philanthropy helps build a sense of accomplishment — “I’m helping others” — while counteracting the sense of superiority or privilege that can inhibit industry.

Assisting others confers a sense of mastery over life, by giving of themselves and their time, children find a satisfying answer to the question “Who am I without my family’s money?” Equally important, philanthropy provides teenagers with an activity that can be shared with the entire family.

Philanthropy demonstrates that they are not just the recipient of giving but have the capacity for giving as well

Philanthropic endeavors contradict this notion of a meaningless existence.

That really got me re-thinking the subject and considering how to weave it into our own family tapestry on this topic.

And they suggest philanthropic behavior can begin young, and should:

Writing a check to charity is too abstract a concept for a four or five-year-old. Young children have difficulty dealing with abstractions and need concrete experiences.

Speaking of philanthropy, what can make the world a better place than screwing over lenders, divorcees and their grasping lawyers? That is one reason I hadn’t fully considered for setting up a trust to protect family assets even if your affluence isn’t “substantial”:

One valuable aspect of putting money for children in a trust that is often overlooked is that it doesn’t just help protect the child from the money, but it protects the money from creditors, bankruptcy court and ex spouses in divorce proceedings.

No idea how timely this advice is as the book was written in 2002 and things may have changed, but one thing I’ve noticed about estate planning is that by nature, tax rates change but the rules and structures of long-term oriented tax avoidance vehicles like this rarely seem to do so in tandem.

Questions to ask yourself when forming a trust:

for what purposes would you be distributing money to your kids if you were doing it yourself?

what would you like to see your children and grandchildren do?

what are you afraid might happen to you?

what might they do with the money that would disappoint you?

Like the comments about an allowance, the authors have a word of warning about thinking that a “trust fund kid” must necessarily be spoiled:

Affluence, if handled properly, allow your child the opportunity to become anything they want. if you raise a child with a strong work ethic and a sense of responsibility, she will want to do the best she can do no matter what career path is taken or how much is in the trust fund.

Trust funds actually seem to serve as an incentive for children who are entrepreneurial but might be a disincentive for children who work as employees

And the final parting shot in the book as the authors look forward toward the social horizon:

It is going to become increasingly vital for us to find money heroes and communicate their stories to our children.

…because our kids are increasingly surrounded by easy access to impressions of bad actors. Facebook was 2 years away when this book was published but they saw the trend nonetheless through the insipid example of TV and movies.